Online ventures generate most of their sales online. Examples include online discount brokerages, auction sites for used items, retailers providing consumer goods and music download services. High-speed communication and secure data transfer technologies have allowed online businesses to operate profitably. Offline ventures are traditional brick-and-mortar businesses that serve customers at physical locations, such as retail stores and restaurants. When you provide services or consumer goods, an examination of offline vs. online shopping data in your field and a look at your potential local customer base is needed to make the best location choice.

Online Stores and Reduced Overhead

The main advantage of an online venture is its low cost structure. You do not have to invest in expensive retail space or hire store personnel, which reduces operating costs. A lean cost structure provides more flexibility, especially if there is a sudden downturn in your industry. Information technology systems can link an online order-entry system directly to a company's inventory tracking system so you know exactly how many items are in stock and when you should reorder. Small businesses can reach a worldwide customer audience through simple e-commerce websites. An online venture offers convenience to customers, who can browse product reviews and place orders at their leisure.

Online Ventures and Drawbacks

An online venture may experience higher product returns because customers did not get the product they wanted or there was damage during shipment. Product returns reduce net sales, which can affect your profits. The additional shipping costs may deter some customers, while others may not be comfortable with the security of online transactions. Online ventures typically cannot provide the personal touch or the first-hand experience that often close a sale. Although online ventures have global reach, they must also compete with potentially thousands of other online ventures offering similar products.

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Offline Shopping Benefits

Advantages of offline shopping include the opportunity for customers to establish personal connections with your business, which can build loyalty. Some customers may prefer to buy only after touching or trying on a product, which may reduce the number of product returns for certain businesses. The offline model is the only option for many businesses. For example, although a restaurant can advertise on social media or put up its menu online, it obviously cannot serve customers online. Similarly, a car dealership is unlikely to be as effective without its sales staff walking buyers through the buying or leasing process.

Offline Venture Limitations

Offline ventures lease or build facilities for their customers, while e-commerce websites are global storefronts for online companies. The market for an offline business is usually limited. For example, a restaurant's clientele may live within a 10-mile radius, which could restrict the owner's growth opportunities. Several traditional business ventures, such as bookstores and video rental stores, have become unprofitable because they cannot compete with the low cost structure of their online counterparts.

Considerations and Picking a Model

Businesses can use both online and offline models. For example, newspapers have built online portals that incorporate multimedia and interactivity to enrich the reading experience. A bank's customers can view their accounts, transfer funds and pay bills online, but they can also go to a branch to make a loan application or to withdraw cash.

When both models can't be utilized, picking requires assessing your business needs and potential customers. Auto repair shops, hair stylists and bakeries must ordinarily meet the needs of customers with a physical location. The sale of goods or services, however, can be conducted through an online store or offline business. Look at the quantity of customers you need and the number you have access to in your area to determine what to do. For example, an antique book dealer may not have access to a large enough customer base in a rural community to justify the expense of a storefront but can sell a high volume of items online because the store reaches the world.

About the Author

Based in Ottawa, Canada, Chirantan Basu has been writing since 1995. His work has appeared in various publications and he has performed financial editing at a Wall Street firm. Basu holds a Bachelor of Engineering from Memorial University of Newfoundland, a Master of Business Administration from the University of Ottawa and holds the Canadian Investment Manager designation from the Canadian Securities Institute.